New California Law Will Ban Pesky Hidden Fees – What Can Consumers Expect?
California has been making headlines recently for its seemingly never-ending changes to the state’s laws and regulations.
But while most of these new legislations have sparked debate among residents of the Golden State, the new law banning hidden fees feels like a win for everyone.
California’s Law Banning “Junk” Fees
The “Consumer Legal Remedies Act: Advertisements,” or Senate Bill 478, recently passed with California Governor Gavin Newsom’s final approval.
It states that, as of July 2024, all businesses in California will be required by law to stop using hidden or “junk” fees to manipulate consumers.
What Are Hidden Fees?
Before diving into the details of California’s new anti-junk fee legislation, it’s first important to understand what hidden fees actually are.
Essentially, hidden fees are the extra charges that businesses do not show customers until the final purchase. The benefit for businesses is that their price tags appear lower than their competitors, but they are extremely frustrating for consumers.
Hidden Fees Have Become More Prevalent than Ever
According to a study conducted by Consumer Reports, more than 85% of 2,000 Americans polled noted finding a hidden or junk fee within the last two years.
Most often, these fees pop up after renting or buying a car, internet or television services, and when purchasing tickets for entertainment or travel.
Even Utility Companies Are Hiding Fees
And it’s not just extracurricular purchases that contain secret additional costs. Utility companies such as gas, electric, and water are guilty as well.
Sadly, these hidden fees cause significant financial frustrations for many Americans who are living on a budget, assuming that they have enough to pay the price they originally agreed to.
Americans Are Standing Up to Hidden Fees
Since hidden fees have become the norm, Americans are standing up and fighting back against the maddening practice.
Consumer Reports explained that 35% of Americans who found a hidden bill fought to get it refunded, and 46% completely canceled the purchase or service.
How Do Businesses Get Away with Hidden Fees?
Technically, until California passed its newest law, hidden fees were not considered illegal.
The Federal Trade Commission defines what they are doing as “drip pricing,” which essentially means that as long as the fees are disclosed at some point (i.e., the last second) during the purchase, it’s totally legal.
California Is Standing Up for Its Residents
But California believes that this lack of regulation is manipulative and wrong, so they decided to pass a bill to ensure every price tag and offer in the state shows the final price of the product or service.
Senators Nancy Skinner and Bill Dodd presented the new bill to the California Senate in February 2023 and are thrilled it has finally passed.
Putting the California Consumer First
Senator Bill Dodd wrote in a statement, “Now we can put the consumer first and create a level playing field for those businesses that advertise the real price, up front.”
And in the same statement, Senator Skinner explained, “California sent a clear message today: The days of bait-and-switch pricing practices are over.”
California Attorney General Is very Excited about the New Bill
California’s Attorney General Rob Bonta fought for the bill to pass within the Senate last year and is extremely excited that it’s finally made it through.
When the bill was passed, Bonta told the press, “Today, California is eliminating hidden fees. These deceptive fees prevent us from knowing how much we will be charged at the outset. They are bad for consumers and bad for competition. They cost Americans tens of billions of dollars each year. They hit families who are just trying to make ends meet the hardest.”
The Consumer Financial Protection Bureau
It’s been said that AG Bonta’s support was in direct response to the Biden administration’s current call for states to better protect their citizens against hidden fees.
And there’s no doubt that Biden and his team are taking this problem very seriously, as they recently created the Consumer Financial Protection Bureau to discuss the protection of American consumers.
Protecting the American Consumer
As AG Bonta said, “California now has the most effective piece of legislation in the nation to tackle this problem,” but it likely won’t be long until other states pass similar laws.
And, if Biden wins the 2024 presidential election, many assume there will soon be a new federal regulation that prohibits hidden fees.